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Source: ‘There is going to be a war’ if owners seek further player salary reductions

2017 Major League Baseball World Series Game Two: Houston Astros v. Los Angeles Dodgers

LOS ANGELES, CA - OCTOBER 25: Major League Baseball Commissioner Robert D. Manfred Jr. talks with Executive Director of the Major League Baseball Players Association Tony Clark during batting practice prior to Game 2 of the 2017 World Series between the Houston Astros and the Los Angeles Dodgers at Dodger Stadium on Wednesday, October 25, 2017 in Los Angeles, California. (Photo by LG Patterson/MLB via Getty Images)

MLB via Getty Images

Reports over the weekend strongly suggest that Major League Baseball and its owners are going to seek further economic concessions from players as a part of any plan to play the 2020 season. The players, NBC Sports is hearing, are hopping mad about it. Indeed, a source familiar with players’ thinking on the matter says that there is “going to be a war” over any 2020 season plan if the owners demand further pay cuts.

The anger stems, primarily, from the fact that the players and owners already had a deal.

Back in March, after spring training was canceled and the regular season was put on hold due to the COVID-19 pandemic, Major League Baseball and the MLBPA reached an agreement over pay for the 2020 season. The specifics:

  • The league would advance the players a lump sum payment of $170 million which players would divide amongst themselves via means they determine appropriate;
  • If there is no season, the players get to keep that money but do not get any more; but
  • If the season is played, players will receive their salaries on a pro-rata basis based on the number of games played. Presumably, whatever the player got out of that $170 million will be backed out of that since it was characterized as an “advance.”

A source familiar with that agreement says that there is a provision in which the players agreed to engage in good faith discussions about the economic feasibility of playing games without fans, but those familiar with the agreement say that provision relates to the decision of whether to play the games or not if fans can’t be present, not that the presence of or lack of fans might alter how players would get paid.

Yet, despite the March agreement -- part of which laid the groundwork for the owners to get the radical reduction in the size of the amateur draft they sought -- it seems that Major League Baseball and its owners are intent on demanding further concessions.

On Friday, Evan Drellich of The Athletic reported that league officials and team executives were going to demand economic concessions from players as part of any agreement to start the 2020 season, with a revenue-sharing plan a possibility. Yesterday Ken Rosenthal made that seem like it will be the owners’ inevitable demand when he wrote, "[b]ecause games, at least initially, will be played without fans, the players would be asked to accept a further reduction in pay, most likely by agreeing to a set percentage of revenues for this season only.”

This is sitting terribly with players. Primarily because, again, there was already a deal in place. More broadly, however, it sits poorly with them because (a) players are the ones who will be taking all of the health risks by playing during a deadly pandemic; and (b) this is, in no way whatsoever, how MLB and its owners have ever treated the risk/reward calculation with respect to revenue.

While the focus on the safety of pandemic-era baseball games has been on the absence of fans in stadiums, and while there is talk about the sorts of precautions the league will take to protect player health, there is no escaping the fact that there will be serious risk to players simply by virtue of playing. A catcher is close to an umpire and hitter. A first baseman holds a runner on base. Teams may travel less under currently-proposed scenarios, but they’ll still be traveling. And staying in hotels, eating in restaurants, and sharing clubhouses with dozens of other people. The players are willing to take that risk because they want to play, but make no mistake, any resumption of the 2020 season is going to put them in greater danger than if everyone stayed home. In light of that, the fact that the owners -- who are under no obligation to cease isolating themselves -- want to cut their pay beyond the deal already reached is galling to them.

Beyond the matter of the health risks is the matter of financial risk, which would be absurdly skewed under the 2020 season scenarios the owners are expected to propose.

When Major League Baseball’s owners have received unexpected revenue windfalls in the past, be it from greater-than-projected attendance, massively-increased TV deals, or billion dollar paydays due to franchise sales or spinoffs of their digital properties, they do not renegotiate player contracts upward. There are not bonuses distributed when a team or the league has a better-than-expected year.

As such, the players argue, why should the players be expected to take pay cuts because this is going to be a rough year at the gate? Is this not a situation in which the league and its owners are demanding all of the upsides of good economic fortune but none of the risks of bad ones? As the old saying goes, are they not asking to privatize all of the profits but socialize all of the losses?

Assuming there are losses.

While it is almost unavoidable that this will be a worse-than-usual year for everyone, it should not be so quickly assumed that the league and its teams will lose money in 2020. A source familiar with league economics tells NBC Sports that they believe MLB will still make money on fan-free games due to the far greater reliance the league has on television and sponsorship revenues than it has historically had. This is especially true given that postseason television revenues will likely be greater this year given that it is widely believed that 2020 will see an expanded postseason structure, with seven, rather than five, teams making the playoffs.

Finally, let us not forget that a single year’s worth of revenue reduction is not anywhere close to as dire for big league owners as a single year’s pay reduction is for players.

Owners are mostly in it for the long haul. Thirteen of the game’s current ownership groups purchased their teams more than 20 years ago. The White Sox and Phillies were purchased by their current groups nearly 40 years ago. The Yankees were purchased by the Steinbrenner family 47 years ago. Only the Marlins and the Royals have changed hands in the past eight years.

The vast majority of these owners have seen an almost unbroken string of profitable years for decades on-end. All of them have seen massive appreciation in their investment. While many of the more recent team purchases have been highly-leveraged affairs, that leverage was underwritten by massive financial institutions and sophisticated investors who, unless they have committed financial malpractice, accounted for the possibility that, at some point or another, there could be economic downturns. Regardless, all 30 owners have the ability to recoup any 2020 losses, if there are losses, and almost all of them certainly will do so in pretty short order.

Players, in contrast, have careers of finite length. A ballplayer’s money-making years are few. Many don’t even make it to the substantial paydays that occasion late-arbitration eligibility and free agency. Even with the deal that was struck in March, players are looking at something close to a 50% reduction in what they expected to make in 2020. Now the owners are demanding a greater reduction. Either way, the players will not get a year tacked on at the end of their careers in which they’ll be able to recoup these losses. Time doesn’t work the same way for an athlete’s body that it does for an investor’s portfolio.

Major League Baseball’s owners are expected to have a conference call tomorrow in which they finalize their proposal to the players. They are expected to communicate that proposal to the MLBPA on Tuesday.

After that: it could be war.

Follow @craigcalcaterra