Why this matters
After a lockout in 2021, Major League Baseball and its players are in a period of peace, but lavish teams like the Padres and Mets are pushing back on long-held myths about baseball's finances and laying the groundwork for a new chapter of MLB labor relations.
Major League Baseball’s 2021-22 lockout, the first since 1990, ended roughly one year ago. The end brought a new collective bargaining agreement to replace the old. The new CBA had more wins for the unionized members of the MLB Players Association than any deal negotiated in decades. The outcome was unexpected from an owners' perspective: They had spent those decades enacting a careful plan that sapped union power, weakened its base, and did so with full public and media support.
Maybe that seemed ambitious and brash of MLB’s 30 owners and the commissioners who helped ensure the plan came to pass, but here’s the thing: It worked. That is, until it didn’t – but the “didn’t” part took most of two decades to occur.
During the 2016 round of CBA negotiations, MLB owners very nearly finished the job of collapsing the union’s power. Picking up where they left off in previous years’ bargaining, they forced players to concede on the draft and international spending by limiting how much teams could spend on signing bonuses. And they focused more on rostering inexpensive players to cut down the spending on arbitration- and free agency-eligible ones, which in turn helped owners avoid scaling spending on player salaries despite nearly two decades of annual record revenues that would be interrupted only by a global pandemic. In 2003, the league-minimum salary was $300,000, and by 2019, it was $555,000; if it had scaled with the increase in league revenue during those perpetual record-setting years, it would have been over $850,000, but MLB’s strategy was to privatize the profits and socialize the losses, so this was all to their plan.
Ultimately, the owners overreached. They made it too obvious that they were eroding existing player-friendly structures in their quest to break the Players Association once and for all. Players almost immediately regretted agreeing to the deal. Large segments of the public and media turned on the league – Ken Rosenthal’s criticism of them even ended up costing him his job with MLB Network, and pro-MLB media coverage from the lockout was especially cringeworthy and obviously reaching – toppling the owners’ public relations house of cards that laid down its foundation under the watchful eyes of Bud Selig. And to the Players Association’s credit, their eventual countermeasures worked: They refused to back down during negotiations over pay during the pandemic-shortened 2020 season, and then stood firm during MLB’s unnecessary lockout that interrupted collective bargaining a year later.
Just like that, a plan that was decades in the making failed. The league and its owners are now left to pick up the pieces and figure out what's next.
That brief history of recent MLB labor negotiations might sound dramatic, like the owners met together in cigar-smoke-filled rooms discussing how they could crush the union and cursing the name Marvin Miller, the labor leader who explained to the players in the 1960s what a union is and could achieve.
But that's pretty much what happened, as detailed in at least two vital books, John Helyar’s “The Lords of the Realm” and Jon Pessah’s “The Game,” cigar smoke and all. Miller's involvement would lead to the first collective bargaining agreement in professional sports and, eventually, the banishment of the reserve clause that kept teams in perpetual control of their players.
Thus began owners’ and, later, former commissioner Bud Selig’s quest to squash the union. Their obsession was so great that they were willing to sacrifice part of the 1994 season and the World Series to turn fans and newspaper journalists against the striking players. Another lockout, like in 1990, would have been the obvious fault of the owners. But by goading the players into a strike with just enough good-faith bargaining that they couldn’t get in trouble with the National Labor Relations Board, owners teed up players to take the heat publicly.
The plan didn’t work in ’94. Federal Judge (and future Supreme Court Justice) Sonia Sotomayor stepped in to effectively end the strike and undo the damage the league had done when they declared bargained subjects like free agency and arbitration to no longer exist, all while recruiting replacement players – scabs – to play spring training games in 1995. Because of the animosity on both sides, a new CBA wouldn't be agreed to until 1997, with the league playing under the previous deal for the 1995 and 1996 seasons.
At that point, Selig and Co. decided to change tactics. The players’ solidarity kept them together in the face of what should have been an overwhelming defeat during the strike. The owners, often at each other’s throats due to personal grudges, envy, and petty power grabs, had to adopt that same solidarity and work together if they were ever going to limit the union’s power.
That is when MLB began "Operation Smol Bean" (as serious historians would come to call it.) MLB began to act like they were just a little mom-and-pop shop in danger of closing because greedy players kept demanding to take more and more. After the 1999 season, Selig put together the Blue Ribbon Panel on Collective Bargaining Agreements to explore the depths of revenue disparity in the league and propose ways of solving it. Some of what was discovered made sense, like broadening what at that point had been a limited version of revenue-sharing due to the growing distance in profits between clubs like the New York Yankees and Selig’s own Milwaukee Brewers. But the real goal of the panel was to threaten folding two clubs. Players had demanded too much in previous CBAs, according to owners, and now they would have to begin making concessions … [puts knife to throat of T.C. Bear] or else the Twins would get it.
It’s impossible to discern between what small-market teams actually needed due to revenue disparities and MLB’s need to create as much union-weakening leverage as it could, and that’s because Selig announced that two teams would have to contract literally days after the 2001 World Series, which had played a vital role in bringing a sense of normalcy to the United States after the terrorist attacks of Sept. 11, 2001. Selig didn’t quite get everyone on the league’s side as hoped, but the Blue Ribbon Panel did successfully convey the idea that “small-market” simply did not have the resources to compete with teams in larger media landscapes.
That idea used to be true, to a degree: Selig, for instance, ran a used-car dealership and inherited the Brewers, so expecting him to go dollar-for-dollar with George Steinbrenner’s Yankees simply wasn’t fair. With revenue-sharing and national television deals helping more and more to balance the sheets and fill the coffers around the league, however, this was less of a problem by the time the term “small-market” became a standard part of the baseball vernacular. Disparity existed as the Panel said, but only to the degree that further revenue-sharing beyond 1997’s somewhat basic introduction of the practice (39% of local revenue was pooled and redistributed to eligible teams, with a small central fund acting as a source of “supplemental” shared money) was necessary, not the elimination of entire franchises. Expanded revenue-sharing to funnel further funds to “small-market” teams would be introduced in the 2002 CBA, too, at the same time that an expanded luxury tax threshold and revenue to collect from the wealthier clubs that exceeded it were introduced. Despite this, the terms and the implications of them stuck.
It’s true that not all MLB teams make Yankees money. Not even close, in fact. The Tampa Bay Rays, Pittsburgh Pirates, Oakland A’s, etc., absolutely make less money annually than the Yankees, New York Mets, Boston Red Sox, and Los Angeles Dodgers. But MLB teams, even in the small-market category, make far more money than anyone is aware. Those annual revenue rankings and reports often published in outlets like Forbes every spring are based only on known information, not what’s within the closed books, and without knowledge of what a team’s lucrative local television deal is, either. We know that the Texas Rangers, for instance, receive $80 million per year for their local television deal, and when it became clear how positively that kind of money from regional sports networks could impact payroll, teams stopped announcing how much those contracts were worth, leaving the information inside their closed books.
In addition, when the Yankees, Red Sox, Los Angeles Dodgers, and the rest of those big-city boys make mountains of money, it filters down to those “small-market” clubs through revenue-sharing, anyway. Revenue-sharing was once more limited in scope, but MLB is now at the point where 48% of all local revenue is pooled and then redistributed to revenue-sharing recipients, on top of each club receiving more than $60 million in national television money every year. The league as a whole set a record with $10.8 billion in revenue – much of it shared – in 2022. And, yet, this myth that small-market clubs are doing what they can to get by, that they’ll have to shut down if they spend on more free agents, has persisted.
Until recently, anyway, and you can thank the San Diego Padres for working on debunking that myth. San Diego is a city of significant size, yes, but as far as its media market goes, it's more like Columbus, Ohio, than Chicago or Los Angeles. Still, they’ve spent, and spent, and spent of late, eschewing their revenue-sharing qualification in favor of paying the luxury tax in an attempt to win the World Series. While they haven’t won a championship in the few seasons since their spending efforts have increased, fan interest is through the roof. The Padres shot into the top third in attendance multiple years in a row and had to put limits on the acquisition of season tickets this spring due to “unprecedented demand.” The “small-market” Padres are spending basically as much money as the Yankees in 2023 and significantly more than their NL West rivals, the Dodgers.
That Peter Seidler’s Padres can do this and actively reject revenue-sharing dollars in the process – exceeding the luxury tax threshold means a team eligible for revenue-sharing won’t receive those funds – is a real problem for league brass. And “small-market” teams that love to pocket as much of their revenue as possible while claiming there’s nothing to pocket – like the Tampa Bay Rays, A’s, Pittsburgh Pirates, and Miami Marlins – are facing active grievances from the union as a result.
San Diego’s behavior makes even the big clubs look bad. If a “small-market” team like the Padres can exceed the luxury tax by approximately $40 million and afford to pay the penalties, then why are the Dodgers only $10 million over the tax in 2023? Why are the Yankees not signing the best available player on the planet at every position whenever a hole opens up in the roster? Why are the Chicago Cubs being so measured and careful in their rebuild instead of flexing their considerable financial muscles?
These questions are how we get to the announcement of an “economic reform committee” by current commissioner Rob Manfred, Selig’s handpicked successor and right-hand man for much of Selig’s tenure. Manfred has said that the committee isn’t another Blue Ribbon Panel-style affair, but instead is meant to facilitate conversations about how to fix the game’s economic situation. The most ire among owners is directed at Steve Cohen’s Mets and the perceived disparity in revenue and spending that he has brought to MLB. But that anger doesn’t make much sense: There’s just one Cohen in the league, and there are already structures in place to keep him from going too wild with his spending. If there weren’t, we’d all be expecting reigning MVP Shohei Ohtani to suit up in a Mets uniform in 2024. Instead, the team wouldn’t even give Carlos Correa the contract he originally agreed to this winter because of the 110% tax that would have been levied on it as well as the rest of the team’s salary. By making an offer in the first place, it’s clear the Mets would have been willing to pay that tax if everything with Correa’s health had checked out in his physical, but it didn’t, so they wouldn’t.
The “Cohen tax,” as it has been nicknamed after its introduction in the 2022 CBA, is going to keep him from reaching another level of spending above the lesser class of billionaires who are his peers. There’s nothing stopping San Diego from doing what they’re doing, however, because the league has already done all it can by stripping away the Padres’ eligibility for revenue-sharing dollars. The Padres simply care less about all that than they care about winning, and a large part of the economic reform committee’s job is going to be figuring out how to deal with the cracks San Diego’s spending has put in the small-market facade. Colorado Rockies owner Dick Monfort is on this committee, and even before it was announced, he publicly criticized the Padres’ spending and implied it wasn’t the right way to build a team. Manfred, too, gave the most concern-trolling response possible about San Diego’s behavior, questioning how sustainable this kind of spending would be in the long run. You know, since the Padres are “small-market” and all.
There are actual concerns for the committee to address, much like there were actual concerns to consider within the findings of the Blue Ribbon Panel. Regional sports networks appear to be dying, or at least finding themselves with owners who don’t want to own them any longer, and MLB is going to have to figure out how to account for that changing revenue stream. You can expect that owners will use this time to suggest that the union back down, concede, and so on in the next round of collective bargaining in 2026. (A similar situation occurred in the 1980s due to fears of a lessened national television and sparked three years of collusion against free agents. In the end, the owners ended up with an even larger TV deal than the one they were working under during those collusion years.)
Maybe the reform committee can’t stop the Padres from spending, but they can attempt to influence the coming discussion about why the rest of the “small-market” teams can’t afford to do so, too. The change in how MLB might be broadcast over the next couple of years is at the center of that conversation. As corporations like Sinclair bail on sports broadcasting, MLB teams could secure their own local distribution rights by cutting out the RSN middlemen, and the league is reportedly in talks to form a three-headed monster of a streaming service with the National Hockey League and the National Basketball Association that, like with the Yankees owning YES and the Red Sox NESN, would surely result in far more money than negotiated pacts. The angst some owners feel now about the future of broadcasting is real, but most of the issues are imagined, or, at least, are about upholding imagined realities like that of the small-market team.
A salary cap could be bandied about, but the union would never accept one. If anything, a 110% tax on extreme luxury tax overspenders is going to be basically the same thing, since it will keep even Cohen from spending exponentially above the average. No, the real focus as owners rebound from their failure to crush the union in the last round of collective bargaining is going to be on figuring out how to keep whatever’s in San Diego’s water from spreading elsewhere – to keep other owners from spending in line with what they actually can, to keep free agent prices and competition down, to keep fans from wondering why their team can’t do what San Diego is doing. The league will use the broadcasting revenue question, the unionization of minor leaguers, Cohen's existence, and whatever else they have to make themselves seem like they’re in danger of closing shop, in the hopes of restarting the long process that began with the Blue Ribbon Panel over two decades ago. MLB’s owners rarely have new ideas, just new versions of old ones, and whatever comes out of the economic reform committee will be used for the same purposes as what came before.