Around the Horn

Solving the issues around the Lockout

Commissioner Rob Manfred and the ownership groups of Major League Baseball have officially imposed a lockout of the players, the first work stoppage in the sport since the catastrophic 1994-95 players' strike.

Why? Well, that may be a simple question, but the answer is complicated. I mean, there's a simple version—because they're big jerks—but then the question gets more refined, "what are the big jerks among ownership and the Commissioner's office so upset about that makes them feel they have to do this inarguably hostile thing?" Again, there is a simple answer—greed—but the details are where we need to dive into to get a satisfactory understanding. (To be clear, there is nothing that says a lockout had to happen if a new collective bargaining agreement wasn't reached by such and such a date. This was a choice of ownership to exert leverage on the players' union.)

 The subjects being negotiated are mostly of the behind-the-scenes nature; yeah, there will be decisions made about on-field rules like the designated hitter expanding to the National League (please, God, no) and adding more playoff teams (again, please no), and potentially things like a pitch clock and continuing the insipid free baserunner in extras thing. But mostly it's about stuff the casual fan doesn't know much about anyway. To wit:

  • Service time
  • When a player is eligible for free agency
  • Salary arbitration
  • Competitive Balance Tax
  • Revenue sharing
  • Draft allocations and "tanking" behavior

Ownership naturally wants to retain as much of the status quo as possible as pertains to these items. The players' union wants changes.

The union has good reason to want at least some of their complaints addressed. Teams have abused the system in regards to a player's service time rather blatantly and a corrective is warranted. This makes sense and is hard to argue against in good faith. They also feel that the system as currently structured defers player pay until longer into their careers than is reasonable and want younger top-tier players to be compensated more on a par with established big stars. This is a more debatable point and may or may not be reasonable, but certainly an issue on which a compromise position should exist. And the union wants the league to punish rather than reward teams that "tank" their seasons—that is, take an approach that deliberately fields an uncompetitive team of low-paid (relatively speaking) players that will lose and lose frequently in order to a) put the team in a better draft position for the next class of young players, and b) pocket funds from the league's revenue-sharing system rather than use it on player payroll. This is also a valid concern, and though teams that engage in this behavior are not really abusing the system as far as drafting goes—it's how the system is designed, and if done methodically it can work in building a strong club over time—it is abuse of the revenue-sharing intent and it's reasonable to explore changes that would dissuade clubs from deliberately losing as many games as they can get away with.

Related to all this is a union concern about middle-tier veteran players having their careers shortened due to the game's economics. Capable veteran role-player types simply are not offered contracts as had been the norm in years past; teams are instead placing more value on younger players coming up through their farm systems and devoting free-agent money to fewer and more expensive contracts. Players like Denard Span (last played in 2018), Austin Jackson (2018), and Ben Revere (2017), who are still in their 30s today and had plenty of productive baseball left in them, saw their careers come to an abrupt end simply because they're more expensive than a younger player that may not have what it takes to stick.

In defending the lockout, Manfred issued a "letter to fans," a piece of blatant propaganda that claimed the union wanted entirely unreasonable things that would hurt the game. One has to consider the source. Rob Manfred has been a wholly detrimental influence on baseball himself, giving him zero credibility on what would or wouldn't hurt the game. The letter is chock full of outright lies as well as questionable spin, clearly intended to sway the public to the side of the owners against greedy, spoiled, childish players. "Despite the league’s best efforts to make a deal with the Players Association," Manfred wrote, "we were unable to extend our 26-year-long history of labor peace and come to an agreement with the MLBPA." If ownership's behavior to date represents "the league's best efforts to make a deal," then everyone in the Commissioner's office and all team CEOs should be fired for incompetence. Or, let's be fair—"best efforts" is a term with subjective meaning; maybe Manfred defines it as best efforts to pull a fast one, or best efforts to create animosity, or best efforts to simply give the union as little consideration as humanly possible.

The owners' side has offered almost nothing to the union in negotiations. One of their alleged proposals even had a stipulation attached that the union had to agree to abandon several of their key issues before being allowed to see the offer in full. One proposal included replacing the arbitration system with a salary formula based on the subjective "Wins Above Replacement" statistic. The only sop they did throw the players' way was a proposal for a salary floor that no team could go below, but by itself that didn't really mean much of anything. Commissioner Manfred would like us to think that they also offered to make concessions on the free agency issue, but that's not really true—ownership offered to change from the current system that grants a player free agency after six years in the league to one that bestows free agency at the age of 29½ regardless of service time, which does eliminate the manipulation of service time to gain more years of control but also penalizes the top players who serve their initial six years before that age and could easily make for some players serving out well over six years before being allowed to shop their services. In fact, all of the proposals put forth by ownership's side would actually hurt the union overall while couched in manipulative language intended to make it look like a middle ground.

Manfred claimed that the lockout "was necessary because the Players Association’s vision for Major League Baseball would threaten the ability of most teams to be competitive" and that the union is unwilling to "compromise or collaborate on solutions." None of that is true. Despite the unsurprising hostility from Manfred and his office, the union, in the person of leader Tony Clark, responded, "We remain committed to negotiating a new collective bargaining agreement that enhances competition, improves the product for our fans, and advances the rights and benefits of our membership."

Union proposals to date have included returning the initial year of salary arbitration to a player's third big-league season rather than the current fourth; penalties for teams receiving revenue-sharing funds that do not use it on player salaries; and a reduction of the free-agent threshold from six years of service time to five, along with starting points on negotiating tweaks to the draft structure.

It's difficult to make suggestions on how to resolve the situation, because ownership—as demonstrated yet again during the 2020 showdown—refuses to open their books and let anyone know how much revenue they actually bring in. One can gather figures from broadcasting contracts and ticket revenue and merchandising sales, but creative accounting comes into play when teams own ancillary business ventures surrounding their ballparks (as the Mariners are now embarking on with the development of the former Pyramid Alehouse on 1st Avenue South/Dave Niehaus Way) and part or all of the regional networks that broadcast their games (as the Mariners do as the majority stakeholder of ROOT Sports NW). Their continued insistence that their revenue streams be kept private suggests either dishonest business practices or simply that revealing the information would show teams rake in so much income that it would give the union more cause to demand additional concessions. 

All parties involved already make what the average fan would consider, in technical terms, a shit-ton of money. Most of us would gladly accept an annual salary matching the Major League minimum (currently $555,000). So from a public-relations standpoint, the players' union is already at a disadvantage because their salaries are public knowledge while the owners keep their books closed. If there were equally public figures available for what the various ownership groups made Manfred and his ilk would have more trouble painting the players as greedy and spiteful children. Yes, the most forgettable of big-league bench jockeys rake in half a million dollars a year, but what does billionaire Chris Ilitch make as owner of the Detroit Tigers as opposed to what he makes from Little Caesars, his hockey team, or his casino hotel? If we knew what clubs' revenue actually was, then we could base any proposals on revenue scaling or percentage of profit or some other transparent metric. But that's not possible, so we have to make do with limited information.

There's no predicting what the final outcome of this mess will be, or how long it will take to get there. But if I may be so bold, I'd like to offer my own suggestions to the negotiating parties. Conceding that blowing up the whole system and starting from scratch is not an option, I'll attempt to work within the current system's framework. Here goes.

  • Reducing the time required to reach free agency is a bitter pill for ownership, but doing so might encourage more contract offers to younger players like the one signed by Mariner prospect Evan White—multi-year deals at better money than a player would make in his first three years but potentially less than he'd get in his arbitration years, perhaps with more years to further postpone free agency in exchange for immediate security. Such deals are already becoming more common, but if a team was only assured of holding onto a player for five years instead of six we might see even more of them. Perhaps not for the biggest stars, though; Jarred Kelenic was offered a similar pact and he refused, gambling that he'd be better off in the end with the arbitration system (and barring injuries, he likely will be if he lives up to even a portion of his potential). Still, this is a tough one to swallow. Going back to arbitration after two years rather than three, though, that could work—the players get to start earning according to their value a year earlier and teams retain six years of control. Thing is, teams hate arbitration because it puts them in unpredictable positions, budget-wise, and more miserly clubs will then work to trade players with higher than expected arbitration awards rather than pay the contract themselves, but really, if players are going to earn on their real value in their earlier years, owners can't have it both ways: Either arbitration earlier or free agency earlier. Pick your poison, but you gotta choose one.
  • Year Teams over CBT threshold* Total levy
    2021 LAD, PHI, BOS $21,551,298
    2020 NYY, HOU, CHC $28,119,227
    2019 BOS, CHC, NYY $15,950,166
    2018 None $0
    2017 None $0
    2016 LAD, NYY, BOS, DET, SF, CHC $74,060,000
    2015 LAD, NYY, BOS, SF $73,000,000
    2014 LAD, NYY $44,950,000
    2013 NYY, LAD $39,530,000
    2012 NYY $18,920,000
    * Pre-2019 numbers rounded. CBT structure renegotiated in 2016.
    The competitive balance tax, which has existed in one form or another only since 1997, is designed to discourage clubs from so outclassing their competition by means of sheer dollars and force teams that do want to spend big to contribute to the league as a whole for the privilege. Any club with a payroll above a certain threshold is required to pay a percentage of every dollar above that line into a redistribution fund, half of which is used to pay into the union's benefit plan and the other half distributed equally to teams that stay under the threshold. The threshold figure and percentage taxed is negotiated in collective bargaining, generally with escalators from year to year for the duration of the agreement. Repeated consecutive seasons over the threshold increases the percentage of tax levied. In 2021 the threshold figure was $210 million (calculated through a formula slightly different from raw payroll figures) and the tax rate was 20% on the overage, exceeded by the Dodgers, Phillies, and Red Sox only, though the Red Sox's overage was minimal and the vast majority of the combined $21.5 million collected came from the Dodgers. 2020 saw the Cubs, Astros, and Yankees pay a combined $28 million, while in 2019, the Red Sox, Cubs, and Yankees paid a combined $16 million in CBT. The union, naturally, wants the threshold figure to be as high as possible so big-market teams will not be discouraged from handing out higher salaries, but go too high and you defeat the purpose. The real problem from the union's standpoint is the percentage hike with every consecutive year over the threshold—a second straight year means the rate levied is 30% and every year beyond is 50% until the club "resets" with a year under the limit, so even the Yankees will pare down after a few years of paying the tax to avoid paying (or continuing to pay) the higher rate. (Additional forms of revenue sharing pools a percentage of each team's gate revenue to be shared equally among each eligible club—those in largest markets were deemed ineligible, the most recent agreement had 17 of the 30 clubs eligible; the whole formula is rather complicated—and national broadcasting fees and income from things like the MLB.TV streaming service are split at an equal measure.)
    Team CBT payroll CBT paid
    Dodgers $258,380,523 $17,440,262
    Phillies $214,329,532 $4,149,430
    Red Sox $213,220,777 $3,983,117
    Astros $209,379,184 $3,406,878
    Yankees $208,962,150 $3,344,323
    Padres $208,235,701 $3,235,355
    Angels $205,217,485 $2,782,623
    Mets $202,110,188 $2,316,528
    Cardinals $183,200,260 $320,026
    Total levy   $40,978,542
    I propose eliminating the consecutive year penalty in favor of a progressive tax rate. If a club goes over the threshold two years, three years, six years in a row, they're in the same boat as one that goes over for the first time. But: they'll pay more if they go way over. Just like your personal income tax bracket. Under the CBT payroll formula, three clubs exceeded $210 million in 2021 but eight exceeded $200 million and 14 exceeded $150 million. Figures for the future subject to adjustment, but let's say the first tax bracket kicks in at $180M at a rate of 10%. The next bracket is 15%, for over $200M; 25% for over $215M; 35% over $240M; 50% over $255M. At right, see the chart with what teams would have paid under this scenario in CBT in 2021. As was actually the case last year, only the Dodgers pay anything significant (in the scheme of a team's payroll, I mean; to you and me it'd be different, but here it's peanuts), but overall the levy is higher and gives more funds to redistribute to fewer clubs. It's highly unlikely that any club would be too concerned with hitting anything under the fourth bracket and teams like the Yankees and Dodgers not 'til the fifth, and even then they might be fine with it and wouldn't have to worry about an extra penalty the next year. The union gets what it wants with less overall disincentive for teams to spend and the league gets more money to shift to the benefit plan and lower-income teams.
  • There is still the issue of recipient teams misusing their revenue sharing payments, though. The CBT by itself doesn't help a single team hardly at all, but overall revenue sharing money can be tens of millions a year for a team like the Pirates or the Rays. No team admits to not spending their revenue-sharing funds, but without open books we don't know what they spend it on. The union wants receiving teams to spend all of it on player payroll, but any team can legitimately claim that they do, so that's a tough argument to make for the players. A better regulation would be to mandate a percentage of all revenue as a payroll floor, but that's impossible so long as owners refuse to open their books. Not sure any sort of floor is a good idea anyway; a better way to go might be some kind of penalty system for clubs that fail to improve by specified metrics after receiving revenue sharing in X consecutive years—such a club would be deemed ineligible for funds for Y years. Agreeing on the metrics would be the tricky part. Some combination of payroll ranking, winning percentage, game attendance, and broadcast ratings, perhaps.
  • Adjustments to who drafts when seem to be necessary to address the tanking issue. Currently, of course, draft positions are in reverse order of the previous season's standings, the idea being that the worst teams need the best draftees to get better. To discourage clubs from deliberately finishing near the bottom in order to get a favorable draft slot the next summer, this has to change. The NBA and NHL use a lottery system to determine draft order for the initial selections, wherein all teams that did not make the prior season's playoffs have an equal shot at getting one of the top selections. For some reason, the union doesn't like this; but while not without controversy, it would be an approach to try, tweaking to make it perhaps the bottom third or bottom half of teams that can get a top pick from the lottery. Make it the first six selections. Then the last team in the standings is guaranteed no better than the seventh draft pick, though it still has a 10% or 6.7% chance to get an earlier one. Another thing would be to disconnect draft position from free agents; currently a team that signs a free agent player loses a high draft selection that the player's former team gets as compensation (there's other complications with "qualifying offers" and such, but that's the gist). Here we can continue to give the team that loses the free agent a compensatory supplemental draft pick, but stop taking picks away from the signing team.

These are just ideas, springboards, if you will. But the issues seems plenty solvable and not at all worthy of the animosity Manfred and company are ginning up.

Get it done, gang. And do it without the &$%#ing designated hitter expanding to the NL or any more playoff teams.

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