Starting 2021: the opening salvo of a bigger MLB labour war?

Earlier this week came dueling headlines regarding the 2021 MLB season with ominous overtones in suggesting that the two main sides aren’t remotely on the same page when it comes to working out the necessary issues and logistics.

The first was a report from USA Today’s Bob Nightengale suggesting MLB and its owners want to delay the start of the 2021 season until perhaps mid-May under the guise of safety to enable widespread vaccination of players and team personnel.

That was met almost immediately with pushback from the players association in the form of a statement that the MLBPA and players were planning for a full 162-game season with normal reporting dates for Spring Training as per the terms of the collective agreement.

In the end of course, circumstances and third parties will probably have as much or more to do with how things proceed than the wishes of either side, in particular any restrictions in Florida and Arizona that are place come late February and March. But it seems to me this is only the opening skirmishes of much broader issues that have been simmering since the last collective agreement was signed, were expected to come to a head after 2021, and have been exacerbated by the pandemic.

On the ownership side, their bottom line incentives are pretty straightforward. Broadly speaking, there’s three buckets of revenue: in-stadium gamedays, local TV, and central funds (national/international TV, MLBTV, etc).

That first bucket is what was completely wiped out in 2020, and will continue to be impacted in 2021. On the flip side, the local TV revenues would be basically proportional to total games played, and the per game revenue much less impacted (if at all, depending on the mix of fees and equity ownership/profit sharing). Some of the last bucket, like MLBTV, would e similarly affected, but the most lucrative portion is for the postseason broadcasts.

Thus it becomes clear why MLB forced such a short season in 2020 when they could have have almost certainly got 80 to 100 games in. Bound by the agreement they made in March with the players to pay them full per game salaries regardless, with one of the two major revenue sources wiped out, the average regular season game was not going to bring in more than it cost.

The only offset to that was the postseason money at the end. Cancelling the season entirely, beyond being a black mark with major potential ling term damage, would mean eating a full year of fixed costs with no revenue whatsoever. Hence using the only lever the commissioner did have under the agreement, and imposing as short a regular season as possible to minimize the overall subtraction from that pot of gold at the end of the rainbow.

MLB tried at various points to leverage a longer season for reduced per game salaries, basically holding the total regular losses constant. For example, if total player salaries were $4-billion for 162 games, that’s about $1.6-million per game. If total variable expenses are $2-million a game, and revenues are $1.2-million per game, the loss of $800,000 per game is $720-millon for a 60 game season. If players take a 15-20% cut in per game salary, you get the same total loss for a 90 game season. Notably, the MLBPA held firm in saying no dice even though it might have resulted in more total money paid (in the above example, $1.8-billion instead of $1.475-billion).

This is directly relevant to 2021 and the initial skirmish. It appears unlikely at this point that early season games will be permitted to have many or any fans prior to widespread vaccination, at least in many jurisdictions. That would make the per game economics very similar to 2020, so under the circumstances teams would be not at all unhappy to see them gone.

However, there is the prospect that by later in the summer the situation will be much better, at which point the pent-up consumer demand for normal activities like going to a ballgame will probably push demand for available attendance capacity through the roof. The per game economics might not just be viable, but in fact very robust.

So the owners at this point have little reason to want early season games without an associated reduction in pay, though it’s far more noble to couch it in terms of public health concerns have than dollars and cents. The players on the other hand, understandably want as full a schedule as possible at their full salaries, especially after only getting one-third of their salaries in 2020.

In the short run, the negotiating parameters are quite similar to last summer. MLB cannot impose salary reductions even if the ability to generate revenues is impaired, but the commissioner at least on paper has wide latitude to cancel games when a National Emergency exists. Whether that would stand up to legal challenges if unilateral imposed and the players opposed them is less clear.

This sets up a difficult situation, but hardly an intractable one either. In a climate of broader comity and trust, one could see a situation where there was some sharing of both the upside and downside as circumstances develop to guarantee as full and normal a season as possible.

That’s difficult to see considerinf the broader backdrop and adversity and mistrust. While the last collective agreement was concluded smoothly after 2016, the economic changes wrought by analytics and more business savvy front offices have left the players increasingly disenchanted. After the slow offseasons of 2017-18 and 2018-19, many were predicting fireworks and the potentially the first stoppage in a generation amid demands for structural reforms when the CBA came up after 2021.

At least then the pie was large and growing, which greatly facilitates the ability to grease the wheels and make a deal everyone can live with. No one wants to kill the golden goose after all. Now though, with two years of impaired financials and the owners crying poor and claiming literally fantastical losses, that’s no longer the case. The players for their part have already seen their cut of the pie reduced over the last decade with soaring franchise values, and seem at their limit.

In my mind then, the question and threat is whether the first shots are been fired in what spirals into into a much bigger war, one that has arguably been building for a while. And frankly, to the extent that knockdown drag out fight was coming over the structural economics of baseball that would have resulted in lost games, there’s a certain logic to just having it out in 2021 rather than passing the buck to 2022.

There’s never a good time for a sports league to lose part of a season due to a labour dispute between millionaire players and billionaire owners. But if you were going to lose half the season, the first half of 2021 is probably the least economically destructive time for it to happen (or even the full 2021 season). The real tragedy would be after the dark coronavirus years of 2020-21 to lose a bunch or all of 2022 just as society returns to normal.