MLB Player contracts in context: It’s not all that it seems

Since the MLBPA does such a poor job communicating the nature of the players’ relationship with the MLB to the pubic, let me take a crack at it. As mentioned in my first article on the current conflict, the players almost always lose to the owners in the court of public opinion, substantially hampering their negotiating position. Why?

  • Most baseball fans don’t understand the restrictive nature of the Uniform Player’s Contract, as well as the terms in the Collective Bargaining Agreement dealing with issues of service time (remember Kris Bryant?) and arbitration (“file-and-trial” now being the norm), and how these have been manipulated by the owners to the detriment of the players;
  • Among highly compensated professionals, baseball players are perhaps the most accessible, look the most like the rest of us (they’re neither insanely tall with super-human skills like NBA players nor giants who can chase down most humans and crush them like grapes like NFL players), therefore, seemingly the least worthy of the sums the best players in other sports receive;
  • It is hard to internalize that most players’ careers are pretty short and that they need the money they make to buy time to start a new post-baseball life, and that it’s a relatively small number of players who receive the $100M+ contracts that gain so much attention (and scorn if they’re seen as not earning it on the field according to the fans); and
  • Unlike most skilled professionals at the top of their fields, they can’t seek a better work circumstance whenever they feel like it and often have to play for ownership who thinks of them like chess pieces rather than whole people who have feelings, families, and fears of life after baseball. After all, it’s more than just money. Most people who play baseball and dream about making the big leagues aren’t thinking “Woo hoo, when I make it I’m gonna be rich!” Most of the elite HS and college ballplayers I know just want to play baseball with the best players in the world. The money is a by-product, not the driver of why players (and their families) make all the sacrifices they do over so many years to see if their players can get invited to The Show.

I worked under contract twice in my Wall Street career, when I received guaranteed minimum amounts for services rendered over a period of years. But I could quit at any time. And while I had a non-disclosure agreement as part of my deals, I didn’t have a non-competition clause. This meant that as long as I worked for the firm I’d receive a minimum of the contractual amounts due, but if I wanted to quit and join another firm, even if they were a competitor, I could. And it could be for any reason — more responsibility, greater span of control, better money, whatever. Pretty awesome, right? Well, the players have no such control for at least six years, when they are eligible for free agency. But because of the rules governing club control for the first three years of service and what’s become a brutal arbitration process, many of the best players who have fast starts in their careers never see free agency because they opt to sign a long term deal to avoid the hassle, stress and risk of an annual fist fight for years 4–6. And guess what — a 2007 study found that average service life in the MLB is 5.6 years, meaning that club control over those first six years is a stunningly valuable option, and something for which the players get little value.

Imagine being at the top of your field, you’ve been recruited by a top firm, and your manager says “We look forward to your joining us. Here’s what you’re going to make for the next three years. We can’t wait for you to outperform all expectations. But if you show promise very quickly, we may convert your employment into a consulting arrangement that won’t count as part of the three years you owe us. But to be clear, it won’t be because we want to extend our control over you. It’ll be because you really need to develop some more by working in a consulting capacity while someone fills that full-time role, or because we’re concerned that with your awesome work that you’ll burn out and we don’t want that to happen, right?” How would you feel if you were put in this position? I’d be pretty unhappy and feel as if I was being manipulated. This is for all intents and purposes what happened to Kris Bryant. And guess what the reward is for making it through those three years? Annual arbitration unless you agree to a long term deal.

All of this can only happen because baseball is a sanctioned monopoly and coordination among the owners is accepted practice. This wouldn’t fly in any other part of the business world. But I feel like this reality is never part of the MLBPA narrative when discussing its positions or how it cares for the long-term good of the players and their families. Instead they let the owners drive the narrative of the highest paid players and how expensive it is to run an MLB team. Do they talk about how much the value of the club has appreciated because of the players’ services? No. The MLBPA should. Do they talk about how much money the General Managers of each team makes? No. The MLBPA should. There is massive information asymmetry between what is happening on the owners’ ledgers and what is happening with the players. And until some of this information comes out from the shadows and the MLBPA begins to own the narrative, the players will forever be doomed to lose in the court of public opinion.

managing partner @iaventures. working @thetradedeskinc @transferwise @signifyd @octanelending @memsql @robinhealthco @ethyca_. alumnus @UMich @Columbia_Biz