Baseball: Battered and broken but not beyond saving

I love baseball and have my entire life. Baseball has played a massive role in my family culture and in our community through having raised two accomplished baseball players, coaching our sons’ Little League teams for years and through leadership in and evangelism for the sport. Professionally I’ve had nothing to do with baseball: the first half of my career was spent in trading and senior management on Wall Street, while for the past 15 years I’ve been investing in and enabling brilliant founders to build ethical, impactful, fast-growing technology companies. These businesses now employ many thousands of people globally and provide good pay, good benefits and cultures that are designed to align the interests of founders, investors, employees and customers. In short, I know what successful business leadership looks like. I am also a person who understands corporate finance and statistics, so funny stuff with numbers doesn’t fool me. It is with this deep passion for baseball and my three decades of business building that I can say this: MLB’s leadership is ruining the game of baseball to the point where the game faces existential risk, notwithstanding a current league enterprise value of over $50 billion. Companies routinely lose billions in value as technologies change, customer preferences shift and business models disrupt legacy approaches. This is what I fear is happening to America’s Game, and league leadership’s ruthlessness, greed, myopia and mismanagement are largely to blame for the current impasse with the Major League Baseball Players Association (MLBPA). And given the millions of fans starved for their favorite teams to take the field, the MLB’s lack of empathy and tribal decision-making in the face of covid has never been more costly to its reputation, its future prospects or its relationship with the engine that powers its growth in value: the players.

The owners have created a narrative largely bought by mainstream media (who often have an economic relationship with the owners via the MLB Network and related properties) which states that because covid has prevented the 2020 season from being played in front of fans, that the players should accept less than their rightful per game earnings as outlined in their contracts. They argue that they’re losing lots of money this year due to the pandemic, and that this pain should rightfully be shared by the players. This might sound rational until you consider the facts. For starters, the owners “own” the business of baseball. They have contractually agreed to pay players fixed sums per game, per year, and they enjoy the benefits of appreciation in the value of their teams. In every other private sector business, these owners would also be responsible for a decline in the value of their businesses, and the responsibility for dealing with losses that occur in the course of operations. However, the MLB owners think that they can push a significant amount of these losses onto the players, helping cushion their covid-related cash flow challenges. This is an ordinary part of business ownership; enjoy gains while being responsible for losses. There is no small print shifting responsibility for losses due to circumstances outside their control. But the media portrayal and, not shockingly, many baseball fans don’t make this connection, resulting in the players looking selfish and inflexible at a time when others are losing jobs and getting pay cuts. But this is wrong; the owners are working hard at making sure they get to keep 100% profits while “socializing” losses to the extent possible. MLB owners aren’t capitalists; they’re opportunists.

While the Commissioner would have you believe that league owners, each of whom has a vast portfolio of assets, are in the same boat as the players, he is wrong. The players have one asset: their baseball career. It’s important to recognize that the average big-league career is around four years, meaning that there isn’t much time to capture the gains of being one of the top ~900 players in the world. Consider this: players are suffering economically by not getting to play 162 games, most of whom aren’t the eight-figure annual earners that the American public has come to believe represent how players get paid (in fact, the median player salary is less than 1/3 the average salary because of the distortion caused by a relatively small number of extremely highly paid players). This represents real hardship for most major leaguers, not to mention their minor league counterparts whose salaries and job status has been slashed far worse. Also, the Commissioner can “impose” a radically shortened 50-game season per the current Collective Bargaining Agreement (CBA), as long as they pay the players their contractually agreed-upon per-game wage. In this scenario, the players are being asked to bear the risks of injury, infection and performance in a truncated season for less than 1/3 their contractual pay; and this doesn’t take into account how challenging it will be for players heading for salary arbitration, or who are up for free agency to do their best with an inadequate preseason and a small number of regular-season games. In such a short season the product on the field will likely be sub-par and keep the players from performing to their potential.

At the root of the current impasse is the fact that the players neither trust league ownership nor the Commissioner of Baseball, and with good reason. The owners frequently cry poverty and indicate that owning a team isn’t a very good investment. Cubs owner Tom Ricketts recently talked about the “scale of losses across the league (being) biblical” notwithstanding the value of his franchise being $3.2 billion, up from $845 million in 2009. San Francisco Giants ownership recently announced a $2.5 billion real estate project near Oracle Park while simultaneously messaging how cash-strapped they are due to the pandemic. These protestations can’t be taken seriously and only serve to highlight the lack of trust between players and the owners. One might think that with the 2021 CBA negotiations on the horizon that the MLB would be working overtime to build trust with the players. Not so. Rather, we’ve witnessed the Commissioner and the owners using every tool at their disposal to hurt the most economically fragile in and around the game (i.e., cutting the amateur draft from 40 rounds to 5, cutting or eliminating minor league pay, damaging the lives of those who depend on baseball being played across both minor and major leagues, etc.) and consistently putting sure-to-be-rejected offers to the MLBPA to run out the clock and impose a schedule of their choosing. The bad faith negotiation style and tactics of Rob Manfred are sure to do one thing: lead to a strike or lock-out in 2021, with potentially lasting damage to franchise values in the process. Historically, strikes and lock-outs haven’t been the death knell to the game that they appeared to be at the time. However, in a world with many more entertainment options, the botched handling of the pandemic and with the MLB coming off seven straight years of declining attendance, the owners’ greed and myopia might really end up killing our beautiful game.

All is not lost, however. As bad as things seem, there are basic principles that, if followed, can resurrect baseball. The first is transparency. The MLB needs to open its books and share league finances with the MLBPA. This can serve as the basis for a revised economic model that aligns owners with players and creates incentives to expand the value of the game for all constituencies. Transparency breeds trust. This can enable more timely responses to exogenous shocks like covid as well as changes in fan preferences. This can also help baseball to be more responsive to the needs of our country and making baseball more accessible, including to young players in urban settings and to families with economic constraints that make travel and showcase baseball financially out of reach. None of this is hard; it just seems so given the tone and precedence set by the Commissioner and the owners. It’s time for a change: for the good of the game and the benefit of the fans who support baseball and its place in American culture.