Last night Major League Baseball Commissioner Rob Manfred went on CNN with Anderson Cooper to talk about a lot of baseball’s plan to try and get the season going again in a safe way. Dr. Sanjay Gupta also joined the two of them for the discussion.

Before we get into the headline of the article, let’s talk about a few of the other points that were brought up during the conversation. Earlier this week we asked the question here at Redleg Nation about a player having the option of not choosing to play in 2020 even if the Major League Baseball Players Association were to vote to play. Manfred addressed this a bit here, noting that while he hopes a vast majority of the players will choose to play, they won’t force players to play who would like to sit out.

Manfred also noted that the protocol for the health and safety of the players, staff, and support staff that would need to be involved for baseball to resume was an 80-page long document that attempts to cover as many aspects as possible. Tests would happen multiple times per week, as well as daily logging of temperatures and symptoms (or non-symptoms) for everyone. If and when a player were to test positive they would be required to quarantine and there would be contact tracing. That player would be eligible to return after testing negative twice within a 24-hour period of time.

And this is important, too. There is a contingency plan in place where if for one reason or another a city needed to be “shut down” again, that another facility/city could be used for a team to continue play. Details weren’t given on where, as it likely differs for many teams. This is just the author of this article speculating, but options could include spring training facilities or unused minor league ballparks in nearby cities that could be “rented” out for the time needed.

You can watch the medical questioning side of the interview here:

Before jumping into the main topic of the “lost money”, I think it’s fair that we all chime in on how long it’s been since Rob Manfred bought a new couch. I haven’t seen a flower-print couch since the 90’s.

Now let’s talk about the statement made by Rob Manfred about how much money Major League Baseball would lose if there is no season played.

The economic effects are devastating, frankly, for the clubs. We’re a big business, but we’re a seasonal business. And unfortunately this crisis began at kind of a low point for us in terms of revenue. We hadn’t quite started our season yet. And if we don’t play a season the losses for the owners could approach $4 billion.

Let’s dive in here, and it’s caused a whole lot of confusion because the math simply doesn’t work. If there were to be no season played where does a $4,000,000,000 loss come from? The player salaries for 2020 are roughly $200,000,000. The MLBPA agreed to $170,000,000 back in March, that was already paid to the players, and the agreement was that if no season were played that they would not get paid beyond that. Minor League players have been paid $400 per week for the last 6 weeks and that agreement is only through May 31st. That comes out to roughly $30,000,000 across all of baseball.

So, player salaries for the entirety of players in every organization for 2020 if no season is played is $200,000,000. That leaves $3,800,000,000 remaining that would come from where, exactly? What is costing Major League Baseball $3.8 billion dollars in losses?

Writer Joe Sheehan used an internet meme to display the confusion of the statement:

What is more likely that Rob Manfred said, and doesn’t expect the general public to actually do the math on (and he’s probably right that a very, very large majority will never even think about the math involved) is that Major League Baseball will generate $4,000,000,000 less in revenue than they otherwise would have if games were played. That, however, is not the same as actually losing the money. It’s funny wording and tricky accounting. Losing that money would be where Major League Baseball is writing checks out for $4,000,0000,000 more than they are receiving checks coming in. That isn’t at all what’s going to happen if no games are played this year.

32 Responses

  1. Tom Mitsoff

    Your take on this is right on. No way they actually lose $4B.

  2. Amarillo

    Isn’t 200MM the price for one team in luxury tax range? Or did they agree to 200MM for everyone if there is no season?

    The 4 billion probably isn’t “profit not earned” but includes things like stadium depreciation, decreases in estimated sale value of team. However even if it is predicted opportunity cost losses, every company tracks opportunity cost losses so this isn’t a new thing MLB is just suddenly making up.

    • Amarillo

      I’ll just quickly add that I’m not saying that an opportunity cost loss is a legitimate loss, that is just how company accountants calculate it.

    • Doug Gray

      They agreed to $170M for everyone (MLB players), total. Their guaranteed salary was $4.3B this year. They settled for $170M if no games are played.

    • Jim Walker

      I agree; but, the public at large is not into accounting to a degree to catch this difference. They read $4B in losses and think it means checks written for $4B more than the amount of revenue that came in.

      I doubt this was an honest misspeak by Manfred. I strongly suspect it is yet another effort to influence public opinion to the owners’ favor versus sticking to good faith negotiating with the players.

      • Hotto4Votto

        Bingo! Misrepresentation for public influence.

  3. Hoosierdad

    Doug, the math is way off. If the average team payroll is $100M, probably way on the low side, then the salaries of just the players is $3B.

    • Keith

      I used the Google machine and found a league average $140MM on Spotrac, which comes out to $4.2B over 30 teams

    • Lazlo

      This would be the case if salaries were being paid in full, but they are not. The agreement from March gave the MLBPA 170 million to distribute among players. So this is the the only outlay for the league to the players, not full salaries.

    • Doug Gray

      The salaries of the players this year if no games are played is $170M total. As in combined, for every team.

  4. Sliotar

    @JimWalker nailed it up above.2

    The 2 dominant messages from each side, so far, in general public perception

    Owners – “Going to lose 4 billion.”

    Players, said loudest by Blake Snell – “Gotta get mine. Not worth risk t cuo play with a pay cut.” (paraphrasing).

    The owners already know where they need to be financially in a shortened 2020 season with limited revenues.

    Start with an outrageous claim (4 Billion) … work down slowly to owners’ real position … all the while making the players feel like they “won” some concessions.

    Probably 2 more weeks of “negotiating”… another outrageous claim … deal struck by Memorial Day or so.

    Zero sympathy for players. Lousy representation by their union so far… as usual.

  5. Sliotar

    As an example … when Scott Boras is a leading voice on the Players side … the players have already lost the battle.

    Boras has to maintain good relations with the owners … he negotiated directly the Lerner family, owner of Nationals, in landing the Strasburg contract.

    Boras is just as motivated as owners to not have a work stoppage.

    If I was a player, I would want Boras representing me.

    But, I would view him as a Trojan Horse if he was trying to speak for a lot of players …. Boras would be among the last to ever recommend a Players’ Strike.

  6. BK

    There’s a lot of talk about MLB revenue, but little about expenses. MLB has closed books. So while there are some good revenue estimates the only area where we have good insight on expenses has to do with player salaries. Looking at Forbes April 2020 report I’ll try to break down the Red’s situation based on 2019 numbers:

    – Revenue: $276M (this likely excludes ownership payments from FSO)
    – Player expenses: $148M (this includes salary, bonuses and benefits) (54% of total revenues)
    – Operating income: $23M (this is NOT profit, but rather earnings before interest, taxes, amortization and depreciation; a.k.a. EBITDA). (8% of total revenues)

    From these numbers we can conclude the Reds spent about $105M (38% of total revenues) running the team in 2019. This would include other salaries, transportation, supplies (balls, bats, uniforms, etc.), grounds maintenance, scouting, marketing, etc. … everything it takes to run the team.

    What I can’t answer is how much would be saved if there were no fans in the stands. I suspect that amount is significant, but in the end, the Reds will have tens of millions in expenses this year in addition to whatever they pay their players. There will also be significant expenses for making adaptations to bolster employee safety due to COVID. Most of the Reds operating income is used to pay EBITDA items–Mr. Castellini has publicly stated the Reds operate to break even and the Forbes analysis over time supports that claim.

    • Don

      had same thought, See my comment below. The 4 billion total loss ($136 mill per team) does not seem unreasonable.

      • Jim Walker

        We need to check our CPU’s and re-compare numbers. I come up with $4B divided by 30 teams being $133.33M per team. But our difference is chump change so speak 😉

      • Don

        Jim, you are right, I used the 4.1 bil/30 for player salaries for my calculations.

        Our difference is Gerrit Cole’s salary for 3 starts assumes he would make 33 starts a year.

  7. Redgoggles

    Wordsmithing – loss of revenue versus accounting net loss; If an individual who earns $100k per year, but only spends $60k and loses their job; did they lose $100k or $60k? I think it’s pretty common to say they lost $100k, or their expected revenue/earnings not what they spend. Having said that, $4B does seem pretty high but overhead costs stay the same regardless of revenue. I’ve not studied MLB’s revenue or costs very deeply, but the article premise doesn’t seem logical to me. If the individual lost his job, I would say he lost $100k per year.

    • Jim Walker

      I invest $10K of my IRA money in “Fund A” and at the end of the year with dividends reinvested it is worth $11K. However the same initial $10K would be worth $12K if I had instead similarly invested it in “Fund B”, another fund I had considered. Did I make $1000 or lose $1000?

      My personal opinion is a person or company can’t lose what they never had. Anticipated revenues or income are not real.

      • BK

        According to generally accepted accounting principles, you would have made $1K. Your emotions may feel differently, but emotions are not considered with regards to profit & loss.

  8. Don

    On face value the 4 billion looks like a large number to loose if no games are played and there is no revenue.
    This would be how the teams will have 4 billion dollars in other costs other than player salary to maintain operations with no revenue.

    I have to do the math when I see these numbers and not just react.

    According to the Department of Labor, Employee wages as a percent of revenue fall between 18% (retail) of the low side and 52% (health care) on the high side.

    According to Spotrac, total players salaries (current and deferred) for 2020 is 4.096 billion dollars. The 170 mill already paid is negligible to the math.

    Assuming that Baseball is close to health care in that 52% of their costs are player salaries.

    When Manfred says that the teams will loose 4 billion dollars, this would means that the player salaries are about 50% of the teams total costs to operate.

    If the player salaries are 70% of the teams total costs then their total costs are 5.8 billion and they will lose 1.8 billion
    If the player salaries are 30% of the teams total costs then their total costs are 13.6 billion and they will loose 9.5 billion

    I guess this discussion really comes down if one believes that the player salaries are 50% of the total team costs or not.

    If the answer is yes, then this number is reasonable
    If the answer is no, there are a range of options above to choose.

    I do not know what the actual answer is but 4 billion ( 4 billion/30 = $136 million per team) in non-player expenses does not sound like a very high number to me. Spring Training costs, rent, office space, Front office salaries and benefits, taxes, scouts, medical staff, etc…)

    • Jim Walker

      I for one doubt they have no revenues. Depreciation is a paper cost; and theoretically there should be less of it anyway if assets set fallow due to less wear tear from usage. There may well be calamity clauses in leases which mitigate rent on the stadium and team owned training facilities.

      Are they propping up minor league affiliates on fixed costs? Who knows.

      Overall I feel a lot like Pokey Reese once said about Jim Bowden if his lips are moving he is lying (maybe in this case not outright lying but certainly not telling the whole unvarnished truth and nothing but the truth).

      • Don

        would agree there is not enough information in public to know for sure.

        If we assume that the front office,managers and coaches for the entire organization and other team employees have on average salaries around 20% of the players total which would be 800 million (26.6 million on average). Benefits, payroll taxes, office space costs, computers, janitorial services, office supplies etc.. usually double the salary for a total cost of employment. So 1.6 Bil/30 = 53.3 million.

        looking through the numbers a 2nd time, I would think that if the teams are not playing games the cost to operating would be closer to 2 billion total not the stated 4.

        All of this is just a guess anyway

      • BK

        Yes, depreciation is a paper cost, but it allows companies to set money aside to cover an anticipated future expense. If that doesn’t happen, long term viability comes into question.

  9. RedNat

    the owners remember 1994. the players do not. if there is no baseball played in 2020 (due to money/contract dispute) and nfl and nba play next year, boy this makes baseball look really bad and the sport suffers for a long time.

    the owners will either given in to the players union or go their separate way and go with minor league scabs but either way baseball will be played this year.

  10. Steve Schoenbaechler

    Frankly, I’m not worried one bit about a bunch of old billionaires losing what amounts to be 1-2 months salary for themselves in what amounts up to be nothing more than the “stock market”, anyhow. And, I do mean “stock market”. It’s simply, this “stock market” has been a guaranteed thing going up in value in recent years. Now they lose some money? Poor things.

    If they don’t like it, I will still trade places with them any day of the week and twice on Sunday.

  11. Eric the Red

    Wait…the players have contracts for guaranteed salaries that add up to over $4 billion this year, and they’ve already agreed to take just $170 million if no games are played? Seriously?

    That seems like some extremely bad negotiating…either now, or in the “act of God” wording that was originally agreed as part of the CBA.

    Which reminds me…don’t forget to include insurance payments to the owners if there’s no season when calculating whether they’ll “lose” $4 billion.

  12. Old-school

    Wait a minute.

    Joey Votto has a contract for $25 million. If no baseball is played because of essentially WW 3… He’s owed money? What planet is this?

    No other employee that lives in the real world gets guaranteed millions and millions for sitting at home and doing nothing in an entertainment world.

    Hazard pay should go to those who are actually risking something for the greater good.

    • Jim Walker

      No, Votto isn’t getting paid if the games aren’t played. The $170M lump sum payment to the players is all they get if games aren’t played. The purpose was to get the owners off the hook for guaranteed contracts.

      Another part of that agreement included the owners paying per game prorated salaries based on the full contract face value. If they end up playing an 80 game regular season, players will make just under 50% of their full contract salary per that original agreement.

      However the owners now say they can’t afford that agreement and want to negotiate down how much the players will get paid.

      • BK

        In fairness … there are reputable, national writers that have interviewed actual labor attorneys that believe the March agreement contained a clause to reopen salary negotiations for economic viability reasons. Others, including some labor attorneys, believe player salaries were settled in March. That is a matter of dispute, not a matter of fact at this point.

        The March agreement was signed in lieu of the Commissioner enacting a clause in the CBA where he could have suspended the terms of the CBA. (see page 361)

        “Governmental Regulation–National Emergency 11.

        This contract is subject to federal or state legislation, regulations, executive or other official orders or other governmental action, now or hereafter in effect respecting military, naval, air or other governmental service, which may directly or indirectly affect the Player, Club or the League and subject also to the right of the Commissioner to suspend the operation of this contract during any national emergency during which Major League Baseball is not played.”

        One of the reasons MLBPA agreed to take only about 4% projected player salary was to avoid enactment of this clause.

        I’m not trying to make a point about which side is right or wrong, but there are two sides to this story. As stated above, lots of articles published about the absurdity of Manfred’s projected loss statement that have made no effort to articulate MLB expenses, they’ve just discussed the revenue side. Both sides will lose a lot more if they don’t come to an agreement, than if they do. They’ll work it out.

  13. Mike Martz

    As a supervisor for one of the last “Made in the USA” union factories in my industry I deal with the union on a daily basis. Anytime there is a piece rate change that takes place there is a constant battle with the union. One of the statements that comes to mind during negotiations may ring true in this instance.
    “YOU’RE NOT LOSING MONEY, YOU’RE JUST NOT MAKING AS MUCH” And then the fight started……

  14. Jack

    Every player has to make a decision for themselves but how will it be handled if say 80 percent want to play? Go ahead and play and bring up minor leaguers?
    For those who don’t want to play I have to wonder if not now then when? If there is no vaccine before next year sit out another year? In the past 4 years was a rapid pace to come up with a vaccine, do we really have faith there will be one ready and proven safe and effective before next year?
    What is the real level of risk under the baseball proposal? I can’t believe it is any higher than when I walked into Kroger and there were people wall to wall and half without masks.
    As far as the finances are concerned that is between the players and management. If you don’t think it is worth playing then don’t.