Owners Getting Antsy About MLB’s Financial State as Boogeymen of RSN Bankruptcy, Steve Cohen Loom
We’re only in the second year of the current CBA in Major League Baseball, the negotiation of which resulted in owners locking out players and screwing up the offseason, but the PR spin is already on for the next round. Despite increasing revenue that now includes selling advertising patches on jerseys, owners are loath to share any more of the economic pie with their employees and they’re taking steps to change the game’s financial landscape.
The biggest of those is the creation of an “economic reform committee,” which is ostensibly meant to address the inevitability of Sinclair subsidiary Diamond Sports Group’s Bally-branded regional sports networks. Those former Fox RSNs currently hold the broadcast rights to 14 MLB teams, but DSG recently skipped out on a debt service payment and is headed for bankruptcy in the near future.
Creditors like Prudential Financial, Fidelity, Hein Park Capital Management, and Mudrick Capital Management would likely become owners of the Bally Sports stations as Sinclair’s debt converts to equity. That would almost certainly mean restructuring existing broadcast agreements to greatly reduce several teams’ annual take. The Cardinals, for instance, are heading into the sixth year of a deal initially signed with Fox Sports Midwest that was to pay them north of $1 billion over 15 years. They won’t be seeing anywhere near that sum in the end.
“We got to find a new model,” commissioner Rob Manfred said recently. “Maybe we ought to be driving the boat, what that model looks like. So, that’s the new challenge.”
While the RSN issue is very real and absolutely should be addressed quickly, ideally with a model that eliminates blackouts for streaming services due to the vast reduction in local media relationships. Contrary to what many people believe, blackouts aren’t about trying to force local fans to attend games. The real reason is to protect those media rights and get viewers to watch on local stations, though MLB’s convoluted blackout map ensures that many “local” fans can’t access those broadcasts in the first place.
And while we’re on the topic of real reasons, we should probably point out that broadcast rights aren’t the primary impetus behind the formation of this little committee. A good number of owners aren’t happy with the way mega-billionaire Steve Cohen is spending so freely with the Mets and forcing other teams to up their own payrolls lest the league’s competitive disparity increase further.
MLB teams winning or losing 100+ reg. season games:
— Codify (@CodifyBaseball) February 21, 2023
“They demand everything’s got to change, and so the answer is to put a study committee together for labor,” an industry source told Evan Drellich of The Athletic. “The whole idea is to basically come up with a system that gets to a salary cap [emphasis mine]. … Rob didn’t lie by saying it has to do with the RSNs, dealing with the RSNs. Because these teams will lose more money and the disparity will get bigger. So they’re using that excuse to have a study committee.”
In addition to talking amongst themselves in closed-door meetings about how they can stifle spending, which kinda-sorta sounds like it could border on collusion, owners have getting their message out in the media. Even John Henry of the Red Sox, who is pretty much the anti-Tom Ricketts when it comes to public visibility, conducted an email exchange with BostonSportsJournal.com in which he addressed MLB’s financial state among several other topics.
“I believe the vast majority of players, agents and clubs dislike baseball’s economic system,” Henry wrote. “During the last CBA, clubs presented ideas for change — ideas clubs thought could address a lot of player issues, but they were rejected. Similarly, the union presented ideas that the clubs rejected. Virtually all of the ideas for change were to address player issues but the system itself has become so convoluted over so many CBAs — each one being an outgrowth of previous ones — that is difficult now to agree on much of anything.
“Somehow the two sides found a way forward as difficult as that was but we continue to have a system — again — players and clubs are unhappy with. The system needs change. Competitive balance continues to be a huge issue for clubs. Players can better identify their issues better than I, but their issues are just as compelling. We have enough time to address fundamental issues prior to the next negotiation. We need ideas, but more than anything, we need to continue talking about the issues and work to address them in a collegial manner. I know our commissioner is committed to this.”
Though he appears on the surface to be acknowledging players’ displeasure, this smacks of “all lives matter” rationale that dismisses those issues as merely part of universal brokenness. In other words, Henry is trying to paint himself and his colleagues as sympathetic figures struggling to scrape by in these tough times. Meanwhile, Cohen is gloating in the corner and saying, “Not all owners.”
For a far more transparent take on the subject, we turn to Pirates owner and notorious skinflint Bob Nutting. During an interview with the Pittsburgh Post-Gazette’s Jason Mackey, Nutting all but called for the implementation of a hard salary cap. After defending his club’s lack of spending — the Pirates have been under $60 million in each of the last three years, ranking in the bottom three in MLB each season — he claimed to have fallen on his sword for the greater good to approve the CBA.
“It’s the single biggest issue facing the Pittsburgh Pirates,” Nutting said. “Competitive disparity, revenue disparity, and payroll disparity are all real challenges. I think it’s great Rob is publicly talking about it. We simply can’t be here in the next cycle. We’ve got to see fundamental change in the economic structure of the game. I believe that we’re positioned to do it — not this year or next year but over the longer-term cycle.”
Hey, Bob, here’s an idea: Sell your team to someone who gives a shit about winning and go live on a tropical island with your billions of dollars. MLB teams are privately owned and enjoy anti-trust exemptions, so no one outside of the league really knows exactly how their finances break down. The Braves had their books exposed since they were part of a publicly-owned corporation, however, and the results didn’t back the owners’ narrative about not making money.
Of course, the real value of professional team ownership isn’t in annual profits but in asset appreciation. These teams are the ultimate status symbol for the uber-rich, a membership to an incredibly exclusive country club at which the dues payments increase rapidly over time. Consider that the Ricketts family bought their way in for around $900 million — never mind that the structure of the sale led to massive tax penalties — and could now sell their membership for $4 billion or more. Not bad.
But hey, the Cactus League starts today and we’ve got three more years before this gets to the point where it’ll affect us to any great degree again. The problem is that some of these owners are so entrenched, both against the players and some of their fellow owners, that I’m really worried about what happens when the CBA is back on the table.
Ed. note: MLBPA executive director Tony Clark was pretty clear about the union’s opposition to a salary cap. I do wonder, however, whether a harder cap in conjunction with a spending floor is something they’d consider.
SCOTTSDALE, Ariz. — Tony Clark: “We’re never going to agree to a cap. Let me start there.” Asked why, he said because it is the “ultimate restriction” on player salaries.
— Evan Drellich (@EvanDrellich) February 25, 2023