How would you setup a fair and balanced financial plan for MLB?

[RedRamage]

Okay, so the idea of this thread here is very much a thought experiment. Here's the senario: MLB and MLBPA have come to you... yes you personally.. and said: "Our system is broken and we're worried our league is gonna fall part. We need you... yes you... to fix it for us. Please create a financial system in terms of balancing big market/small market, revenue sharing, player salaries--including caps and/or floors, and owners interest in a fair and equitable manner as possible."

The rules here are pretty simple: You have the power to do anything, BUT... you need to be at least reasonably realistic about it. You can't say: "Owners only get to make $100 profit per year on their team." Nor can you say: "Players agree to a cap of $5M per player per season." Your goal is to set up a system that at least won't have the players or owners storm out of the room vowing to make their own league (with blackjack and hookers). Your system should also not assume owners or players are kind, noble, and altruistic. In other worlds: Expect some to try to game the system and build in safe guards to prevent it where possible.

[AlaskanTigersFan]

- Institute a hard salary cap for competitiveness. No defferred payments. Owners and Players association get a vote and the Commissioner acts as an arbiter. Cap goes up 5% each year.  (Owners win - Their biggest ask by far)

- Free agency though, comes to players after 6 years of being drafted or originally signed. No more Qualifying offer allowed. (Drastically speeds up process of reaching Free Agency) (Players win)

- Salary floor being 40% of the Salary Cap. So example: if Cap is $400 million, the floor is $160 million.  (Players win)

- Allow Private Equity groups to buy into MLB Franchises (Helps if owners can't afford the minimum salary floor. They should probably sell their team then anyway.) (Owners win)

- Eliminate draft pool amounts, but put a floor of draft pool. Something like $8 million. (Players Win)

- Greatly increase league minimum to let's say $250,000. (Players win)

- 15% of all MLB revenue profit, is put into a pension fund for players. Tiered system based off players time (Players win)

- Owners get 20% of all marketing money made by players under their team's logo (Owners win [NIL anyone])

- Create an International Free Agent draft (Owners win)

- Allow contracts to be performance based instead of guaranteed in addition to guaranteed contracts (either or); Example: A player has OBP over .350 they get 5 million salary, over .360 is 6 million salary and for each home run is $500,000. (Both Owner and Player win as Owners pay for production and players can bet on themselves if they choose to do so).

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Just a couple of thoughts there to get started. 

 

[chasfh]

If a salary cap is required then a salary floor should also be required, although I don't think it should be as low as 40% of the cap. The NBA has a salary floor of 90% of the cap, which keeps teams from spending their way to titles. I'd like something a lot closer to that.

Also, I'm not wild about whatever the unintended consequences of allowing opaque private equity money in the game is, since EPETD.

[AlaskanTigersFan]

3 hours ago, chasfh said:

If a salary cap is required then a salary floor should also be required, although I don't think it should be as low as 40% of the cap. The NBA has a salary floor of 90% of the cap, which keeps teams from spending their way to titles. I'd like something a lot closer to that.

Also, I'm not wild about whatever the unintended consequences of allowing opaque private equity money in the game is, since EPETD.

I dunno what EPETD is...... But, this year the NFL is allowing Private Equities to invest in their teams for the first time. They can also have majority ownership from my understanding. MLB has allowed PE firms to buy into their clubs since 2019. But they can't be majority owners. I think they should be able to if theirs a cap/floor. Look at the Pirates owner for example. If he can't afford it, he needs to sell his team...... Just like the Rays, the A's and so on..... These guys are raking in money and just pocketing it. I can see why the players are frustrated.

Having said that, MLB players are signing 30/35/40 million per year contracts. One of the best NHL players is considered possible overpay at 8 million per year? MLB players have got to realize how good they got it....... Owners need to quit being such cheap a$.....ses. There can for sure be more balance. Both sides need their heads slapped together though. 

[chasfh]

10 hours ago, AlaskanTigersFan said:

I dunno what EPETD is...... But, this year the NFL is allowing Private Equities to invest in their teams for the first time. They can also have majority ownership from my understanding. MLB has allowed PE firms to buy into their clubs since 2019. But they can't be majority owners. I think they should be able to if theirs a cap/floor. Look at the Pirates owner for example. If he can't afford it, he needs to sell his team...... Just like the Rays, the A's and so on..... These guys are raking in money and just pocketing it. I can see why the players are frustrated.

Having said that, MLB players are signing 30/35/40 million per year contracts. One of the best NHL players is considered possible overpay at 8 million per year? MLB players have got to realize how good they got it....... Owners need to quit being such cheap a$.....ses. There can for sure be more balance. Both sides need their heads slapped together though. 

EPETD = Everything Private Equity Touches Dies.

Private equity firms do not buy businesses to build businesses. They buy them to quickly extract whatever remaining value there is in them before leaving them for dead. I would prefer they not leave the carcasses of numerous big league teams strewn in their path as they move rapaciously through the big league baseball landscape.

In a way, though, that is kind of how some billionaires see the opportunity of buying into sports teams now. The ability to make oodles of cash without having to seriously invest in the product, driving up the desirability and thus value of all franchises, is what makes owning the Pirates, Athletics, Marlins, etc., such a sweet deal for people who are far more fans of money than of baseball.

Not for nothing, this is also why that particular faction of owners is spearheading the move toward limiting the amount of investment teams can put into technology. In a competitive business landscape, teams have to amp up that kind of investment so they can effectively compete and win in the marketplace. In a monopolistic/trust business landscape, the owners can conspire to squelch such inconvenient competition by forcing everyone to forego that investment, which serves in the long run to degrade the end product consumers receive.

As for the NHL, they generate only half the revenues MLB does, although I also wonder whether there is a basic psychological difference in the expectations of hockey versus baseball players when it comes to the pay. I have no idea what that would be.

[RedRamage]

The idea that was swimming in the back of my head that prompted this thread was trying to figure out some way to get a salary cap, but also give the players some slice of the revenue outside of salaries... thereby eliminating the idea that MLB is artificially limiting players salary and pocketing big chunks of money without any cap there.

Of course this would be a major change for everyone so I'm not sure how it would go over and I'm not sure I'm smart enough to have thought of all the unintended consequences, but my idea would work something like this:

Part 1: Salary Cap and Salary Floor are set (I'm with @chasfh here of the floor being closer to 90% than 40%). I would also set the cap lower than most people probably would expect it.

Part 2: All media revenue is pooled together. 70% is distributed to owners based on their teams salary. 20% is distributed to players based on their individual salary, 10% is evenly distributed to players.

Now I suspect part 2 might be confusing so here's a simplified example:

Owners 70%: To make the math easy, let's say the Salary cap is $100, the floor is $80. There are 5 teams. Media revenue totals $50K. Then each team's portion of the media revenue would come out like this:

The idea here is that the teams that spend more on their salary get a larger share of the media revenue. This way teams are encouraged to spend more on salary to get more media revenue.

Players 20%: This would work out similar to the owners 70%. Players get a chunk of money based on what percentage of total players salaries equal their current salary accounts for. Players who have a bigger contract get a bigger cut.

Players 10%: This would ensure that even those who are making league minimum would get something extra from media revenue.

Obviously the percentages can all be adjusted here to what makes things seem fair. But my goal here is to set a salary cap to try to enforce a bit more level playing field for all team. I also want to make sure teams can't just pocket the big market revenue and not spend it on improving their team. I also want to try to make it so that players aren't locked out of making extra money if profits for MLB go up.

[AlaskanTigersFan]

I guess, how realistic is the cap to be that close to the floor? Suppose you have a $300 million salary CAP. That means the floor is $270 million at 90%....... That's a fine needle to thread in the baseball world..... 

[chasfh]

8 hours ago, AlaskanTigersFan said:

I guess, how realistic is the cap to be that close to the floor? Suppose you have a $300 million salary CAP. That means the floor is $270 million at 90%....... That's a fine needle to thread in the baseball world..... 

My impression is that they manage to do that exact thing in the NBA.

[Arlington]

They need to put 1200 of the best players in the game in a park.  Team GMs toss a bat to each other and through a few rounds of this (there are 30 teams so one bat wouldn't do it) determine which team gets to pick first, second and so forth, and then call out the player you want on your team through 40 rounds.  Once you have your group of 40 players, you all huddle and work out what your team name will be for that year.  Everyone gets paid the same base salary which is still far more than any reasonable person should expect to be paid for playing a game.   Some might call this socialism or communism or make up some new term for this disarrangement, but in the end most teams will be competitive and the result will give nearly all fans a really interesting season.  

[AlaskanTigersFan]

34 minutes ago, chasfh said:

My impression is that they manage to do that exact thing in the NBA.

Big difference from 14 man rosters and 40 though. 

[gehringer_2]

49 minutes ago, chasfh said:

My impression is that they manage to do that exact thing in the NBA.

yeah - In the NBA, trading for guys you don't want just to get the *cost* of their contracts is one of the weirder things in pro sports.

Edited 21 hours ago by gehringer_2

[chasfh]

12 hours ago, gehringer_2 said:

yeah - In the NBA, trading for guys you don't want just to get the *cost* of their contracts is one of the weirder things in pro sports.

And yet, the NBA is arguably the number two sports league in the world, probably after the English Premier League. Inarguably number two in this country, at least. And no one has mentioned it here yet, but the NFL also has a hard floor requiring teams to spend 89%-90% of the league cap across a four-year period.

I’m not sure whether managing a 90% cap situation at a 26- or 40-man roster would be impossibly more complex than at 14, but I would think there are systems have been devised to do something similar enough that they could port it over to MLB usage.

One big thing I can see preventing a tight ceiling-floor regime would be active blocking by the Pirates/Marlins/Athletics wing of ownership, the bloc that wants to simply harvest the business and pocket the cash. Their teams may be minnows on the field, but they might be considered whales among owners and able to project their will onto everyone else. Not sure about that either way, but it’s possible.

Another problem might be the requirement to open the books to Players. No owner would ever want to do that. One of the biggest prizes of the Sherman exemption is the ability to operate in secret, yielding the ability to bury the sources of revenue within the business to minimize or eliminate taxes. Agreeing to a cap/floor band might well end that gravy train for them.

One other large problem I see is actually implementing the payroll band among the teams effectively. Suppose they agree to a regime similar to the NBA/NFL in which a salary cap is set at 50% of league revenues with a 90% floor, whether trued up on a season-to-season basis, across a four-year period, whatever. Estimated 2024 MLB revenues that I could find said $12.1 billion. Fifty percent of that is $6.05 billion, and that divided among 30 teams would yield a roughly $202 million payroll cap with a $181.5 million floor.

That sounds fine and all to us fans, but how would they actually manage the payrolls of currently $300MM+ teams like the Dodgers and Mets and Yankees and Blue Jays to bring them into compliance with that payroll band? Grandfathering current rosters and working toward the cap across an X year period sounds like a solution, but there is probably an entire competitive parade of horribles lurking within a solution like that, one that might disadvantage the Dodgers and Yankees on the field for some period of time, and I promise you Baseball would have explicit antipathy for that idea. That itself might be enough for them to continue rejecting the idea as being completely unworkable in the real world.

Someone at a higher pay grade than I could probably figure out it, or maybe not, at least to a degree acceptable to everyone. But looking at it from this standpoint, I could see them never agreeing to a tight payroll band. It might be closer to what ATF suggested, a really loose band where the floor is something like a third of the cap, and maybe across time they tighten that up to something closer. Whether they would get anywhere near an ideal of 90% is anyone’s guess.

Edited 8 hours ago by chasfh