Ever since reading through Ethan Hullihen’s recent series on the MLB lockout, I’ve been thinking about one thing: What do the owners need?
Baseball as we know it has become a windfall of cash for the owners. As an example, let’s go no further than the Pittsburgh Pirates and owner Bob Nutting.
The Pirates are one of the small market teams in baseball that receives revenue sharing money from the large market teams. Between the revenue sharing money, the local TV deal, and their share of the national TV deals, Bob Nutting doesn’t need to sell a single ticket to worry about making a profit.
Bob Nutting doesn’t need to put a competitive team on the field to attract your business.
Eventually, he will need to do so. Or, he will need to fire the people who aren’t getting that done, and replace them with people who will say that their way is the way to get the Pirates back to a winning organization, fighting against the constraints that MLB places on small market teams.
Until that happens, there will be a general tacit approval that the Pirates can spend rock bottom prices while they’re losing, all to inevitably say they’re sticking to a budget and can’t go a penny over their imposed limit when they’re winning.
Pirates fans might get upset, but does that matter? Bob Nutting doesn’t need their money. MLB ensures profitability, or at least the ability to break even, regardless of a team’s intent or intensity on trying to contend.
There might be some murmurs around the league about how the Pirates are always a losing team, but that’s just the norm, and won’t add any pressure.
The players might invoke the Pirates as part of the problem, but that would come with invoking four other teams, and not really seeing the big picture.
That big picture? Five large market MLB teams have a golden ticket to the MLB playoffs each year with their ability to spend. Five small market MLB teams save every penny for their one winning stretch each decade. The other 20 teams take turns seeing which four or five emerge as the remaining playoff teams.
Bob Nutting doesn’t need to worry about the fans, because he gets paid by Yankees and Red Sox fans. MLB is bringing in record revenues with their TV deals, which are largely earned by ratings. MLB has a strong trend of large market teams dominating their ratings on the national scene. They sign record deals based on those ratings, and the league is designed to give a few specific teams a sizeable advantage, at the expense of the smallest markets in the game.
Revenue sharing in MLB might as well be “hush money” for those smaller markets, because all it does is allows a system where they can stay viable with a decreased chance at competition. There aren’t enough of these teams to band together and make a change. They will never get the public on their side, because they are all teams owned by billionaires who are crying poor because they can’t compete with other billionaires.
But, are they actually trying to compete?
Let’s scale out from the Pirates for a second.
The way we normally talk about the Pirates and Bob Nutting is that Bob Nutting is the owner of the Pittsburgh Pirates, and it’s his sole focus to make the Pirates as profitable of a business as he can, with no regard to any other business. In this theory, there would be 29 other owners acting the same way.
Now, let’s wake up and see reality.
MLB owners voted unanimously to lockout the players at the stroke of midnight after the Collective Bargaining Agreement expired. They made very little attempt to negotiate away from a system that is raking in record revenues to the increasing advantage of the owners.
The owners have successfully done what the players need to do. They became a group of one — Major League Baseball. They’re not 30 individual entities under a union. They are going up against 1,200 individual entities under a union. It will be more difficult for the players to stay together.
As for the owners, they all have a massive incentive to keep the game the way it currently is going.
As Jason Gindele pointed out in the comments of one of Ethan Hullihen’s articles, the valuation of MLB franchises has exploded over the last decade-plus. The Pirates, for example, went up in valuation almost one billion dollars between 2009 and 2019.
On the field, the Pirates were contenders for three of those years. Off the field, they had competitive payrolls for less than half of those years.
If Bob Nutting would have sold the team in 2009, he would have made a lot of money. If he sells now, he’ll make a lot of money, plus one billion more monies. That means he essentially has earned about $100 million per year just by remaining the owner of arguably one of the worst pro sports franchises in the United States.
All of this is unrealized, of course. Nutting wouldn’t see that money until he sold the team. He’s given no indication that he ever would sell the team.
And why would he?
There is no financial risk in owning the Pittsburgh Pirates. The financial books of MLB teams are such a secret that every owner can just wave their hand and whisper the word “budget” to dismiss any suggestion that they aren’t spending every last dollar.
The MLB owners are all in unison to keep the current system as close to the current system as possible, while trying to find ways to increase revenues and keep more of it.
MLB is looking at continued record revenues for the better part of the next decade, locking in this safe system.
This is the problem the players face.
I don’t know how much realized money that Bob Nutting has made from the Pirates over the last decade. The common claim is that the Pirates owners don’t take a profit, but we know that they are just delaying that profit. Why does Nutting need an annual profit anyway when he can simply sell his ski resorts for $125 million?
The players, meanwhile, are all independent entities trying to earn money that I would say 99% of MLB owners were born with. That includes Bob Nutting. The owners are all claiming they don’t make money, and as long as they don’t sell, they don’t realize the windfall of profits they get from being MLB owners.
There’s no windfall for the players. There’s no ownership of the game that they create.
Consider that chart above that spanned from 2009 to 2019.
Coincidentally, the 2009 season was when Andrew McCutchen arrived in the majors. Since that point, McCutchen has been very successful, and very financially successful, making around $115 million in career earnings.
When Andrew McCutchen retires, his career earnings are frozen. Whatever he made in the game is what he made. He can’t sell his ownership share in the game of baseball for a final payout that is greater than the sum of his career earnings.
If Bob Nutting ever sells the Pirates, the profit from the sale would be ten times the earnings of McCutchen’s career earnings. And I’m not even going to debate whether they’ve actually refused to take yearly profits from the team for whatever reason in whatever year.
Thus, the problem for the players. They have no ownership of this game. They have very little ownership of their careers, with a free agency system that can be manipulated to restrict their earnings and bargaining power completely through their prime production years. Their only goal is to get in the game and make as much money as they can in their limited window.
There’s no window for the owners. Their money is made. Future payments are already promised. The league is set up to keep all 30 teams out of the red.
So what is the incentive for the owners to change anything about the current game?
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