MLB Creates Economic Reform Committee

One year after a tense period of CBA negotiations between MLB and it players that resulted in a lockout and a delay to the start of the 2022 season, it appears the league is already preparing for the next round of negotiations. According to Evan Drellich of The Athletic, the commissioner’s office has formed what they’re calling an economic reform committee chaired by Dodgers chairman Mark Walter. Drellich reports that Tigers chairman Chris Ilitch, Red Sox principle owner John Henry, and Rockies chairman Dick Monfort are among other members of the committee of franchise owners. The current CBA is set to expire following the 2026 season.

As Drellich notes, the impending bankruptcy of Diamond Sports Group, owner of the Bally Sports networks that hold the TV distribution rights of 14 MLB teams, appears to be a catalyst for the creation of this committee. Should that bankruptcy indeed come to pass, it would open the door for MLB to begin work on a league-wide streaming service free from blackouts. But according to Manfred, discussions of such a path have brought about concerns about disparity between the revenues of clubs:

“We have businesses that are literally not similar in terms of the overall revenue that they’re generating.” Manfred tells Drellich, “And to the extent that you could find a new distribution model that actually helped on that disparity side, that would be the daily double. So people are having conversations that haven’t been had in baseball, and it’s really been owners talking to owners, which is a good thing.”

As Drellich points out, the financials of most MLB clubs are not public and the new committee has no plans to produce a league-wide financial report, making it impossible to verify most claims related to revenue. But Drellich reports that concerns about revenue disparity have been exacerbated by the willingness of Mets owner Steve Cohen to put up record payrolls that dwarf those of other clubs. Per RosterResource, the Mets 2023 payroll for luxury tax purposes currently sits at almost $374 million, and that’s even after the club’s bid to land Carlos Correa on a 12-year, $315 million contract fell through due to concerns about Correa’s physical.

Drellich quotes an industry source as saying that “[Small market clubs] demand everything’s got to change… The whole idea is to basically come up with a system that gets to a salary cap.”

For his part, Manfred claims that the league has not “even begun to think about where we’re going to be the next go-around” of collective bargaining negotiations, but Drellich notes that other quotes from the commissioner indicate the proposal of a hard-cap could be on the horizon:

“When I talk about a more national product, sort of the thought there is that a more national product produces more centrally shared revenue… which, in turn, we hope, would reduce payroll disparities. At various times, we have talked and proposed, including in the last round, about direct payroll regulation, in addition to that, having a minimum payroll… We remain open to those sorts of solutions. Obviously, we’re a long way from the next round of bargaining, but there are ways to get at it.”

Even if the league has interest in pursuing a salary cap in future CBA negotiations, plenty of obstacles remain. The MLBPA, which Drellich reports declined to comment on the league’s new committee, has of course staunchly stood against a salary cap for decades. Drellich also notes that teams likely disagree as to where a hypothetical cap and floor would be set. Still, this committee serves as a reminder that, even with the lockout in the past and a new agreement in place that should keep labor peace for at least the next four seasons, more difficult negotiations remain on the horizon, both between owners themselves and between the league and its players.